Alice Corp v. CLS Bank: The Technology Court Battle of the Year?

High profile patent cases involving well-known brands and huge financial stakes, like Apple v. Samsung and Samsung v. Ericsson, grab virtually all of the media attention out there. In a sense, they’re the media darlings of patent litigation — easy targets with lots to report on.

There is one case, however, that stands to make a huge impact on the future of intellectual property, but doesn’t come with the billion-dollar price tag.

Alice Corp. v. CLS Bank will be heard by the Supreme Court some time in 2014, and has been dragged through every conceivable iteration of the judicial process. Joe Mullin of Ars Technica says “There’s no telling how Alice v. CLS will turn out, but it will probably be the technology court battle of the year.”

Deconstructing the Alice v. CLS Case

Alice Corp., an Australian company, holds patents for electronic methods, systems and computer programs used in its Alice Market product. According to their website, Alice licenses Alice Market to parties who use it to “contract electronically and anonymously with each other in a real time and secure environment for the purposes of: hedging known risks, investing in known risks for profit, lending/borrowing from one another, and exchanging value between one another.”

Alice Corp. obtained four specific patents from the USTPO between 1999 and 2010. In 2002, they approached CLS Bank International, a subsidiary of CLS Group Holdings AG based in New York, to license Alice’s patents. CLS refused the offer.

In 2007, CLS Bank in turn sued Alice in the United States District Court for the District of Columbia. They wanted a declaratory judgment to render Alice’s patent claims invalid based on the fact that the patents covered an abstract idea and were therefore not patentable.

The District Court sided with CLS Bank in 2011, and stated that a method “directed to an abstract idea of employing an intermediary to facilitate simultaneous exchange of obligations in order to minimize risk” is a “basic business or financial concept,” and that a “computer system merely ‘configured’ to implement an abstract method is no more patentable than an abstract method that is simply ‘electronically’ implemented.”

Alice fought back by appealing the decision, and in May 2013, the case made its way to the US Court of Appeals for the Federal Circuit. A full court of 10 judges presided over the case and the result was what Joe Mullin called “the most splintered rulings ever to come out of the court.”

One of the judges said, “abstract methods do not become patent-eligible by being clothed in computer language,” and called Alice Corps. patents, “literally ancient.”

Another, Judge Rader, championed the defense of software patents by saying, “a computer without software gathers dust, not data,” and called the split decision of the court “the greatest failure in my judicial career.”

Judge Kimberly Moore writes that “there has never been a case which could do more damage to the patent system than this one.”

Supreme Court Steps In

The fact there is so much dissention in the US Court of Appeals validates the US Supreme Court’s current involvement. And it’s not just Alice v. CLS that’s at stake here, as roughly 42,000 computer software and hardware patents were granted in 2011 alone.

Judge Kimberly Moore estimates that 20% of them could be rendered invalid if the US Supreme Court rules against Alice Corp, making this under-the-radar case perhaps the most important one of the year.